Rates from Bankrate.com

Mortgage

Credit Cards

Auto

Market Tightens, With Mortgages Still Out of Reach for Many

Written by: Brian O'Connell01/12/13 - 9:00 AM EST

NEW YORK ( TheStreet) -- Two sets of numbers out this week paint a picture of the U.S. housing market getting healthier, with buyers able to take advantage only if they can wrest a mortgage from a cautious banks.

First on the docket are lower home inventory numbers across the U.S., as measured by Movoto Real Estate . Movoto notes the number of houses for sale on the U.S. market slid by 27% from December 2011 to last month.

That's good for the housing market, and especially so for homeowners, who have seen the value of their homes fall 20%, 30%, and 40% or more over the past four years.

It works like this: When home inventories are reduced, that leaves fewer homes on the market and fewer options for homebuyers. That drives up the price of the remaining homes on the market, and that spills over to nearby homes, where values rise as well.

In other words, lower inventories are an economic driver in the housing market -- they can help turn buyers' markets into seller's markets.

Here's how Movoto explains it in a blog post this month:

Most homeowners are nervous to sell their homes because they are either underwater or believe prices will continue to appreciate. Additionally, we are seeing a rise in investor demand coupled with a decrease in foreclosures.

This small pool of housing inventory pushed prices up significantly the past year. Unless this trend changes, 2013 will only be more of the same.

According to the Washington, D.C.-based National Association of Realtors , the NAR's Housing Affordability Index landed at 198.2 in November, the most recent month measured by the association.

That's up from 186 the year before, which set a record in its own right, the NAR reports.

"Although 2012 was highest on record, the excessively tight underwriting precluded many would-be homebuyers from locking in generational low interest rates," says Lawrence Yun, NAR's chief economist. "Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third-best on record in terms of household buying power."

"A window of opportunity remains open for buyers who can qualify for a mortgage," he adds.

One issue that could restrict housing affordability, and it's not a new one, is tight mortgage credit. Banks and mortgage lenders still aren't stepping up to the plate and making loans to otherwise solid borrowers.

"A more sensible lending environment that makes it easier for other financially qualified buyers to get a mortgage would allow many more households to enter the market, boosting home sales as much as 10% to 15%," explains Gary Thomas, president of the NAR.